Preparation for Divestiture

When a consolidation group divests a consolidation unit at any time during the year, you can use this function to adjust the reported financial data, the standardized financial data, and the consolidated financial data. After this data is adjusted, the financial statements contain only the data that relates to the time in which the consolidation group had ownership in the consolidation unit.

Features

Preparation for divestiture treats financial statement items as follows:

Balance sheet items are cleared taking into consideration the cumulative values that were recorded prior to the final divestiture.
Income statement items are handled only for posting level 32 (see Consolidation Group Changes for Group-Dependent Entries).
Statistical items are ignored.

Value Selection and Posting Period

The cumulative values prior to divestiture need to be determined. Assuming that the divestiture is booked in period n, the following selection is made:

Divestiture At…	Preparation for Divestiture Selects…
End of period n	Data of periods 0 through n
Beginning of period n	Data of periods 0 through (n-1)

If a consolidation unit is divested from a consolidation group on June 30, the system selects the values for periods 0 through 6 for the adjustment entries.

Divestiture Accounting Period and Posting Period

Preparatory entries are always posted in the last period of the consolidation interval (as with all other tasks). Preparation for divestiture postings are triggered when the divestiture period occurs in the consolidation interval.

Posting Logic

The system clears the period total of the selected values (by posting the period total with a reversed debit/credit sign). This replaces the balance sheet items and transaction types. The transaction types are replaced if the balance sheet item is broken down by transaction types and the transaction type for divestitures for the consolidation group is not initialized.

Only the following balance sheet items are replaced:
- Retained Earnings - Current Year
- Retained Earnings - Prior Years
- Retained Earnings - Current Year Prior to First Consolidation
- Retained Earnings - Distribution of Dividends
- Retained Earnings - Clearing Item for Distribution of Dividends
- Retained Earnings - Bonus Management
- Retained Earnings - Transfers to Appropriated Retained Earnings and similar items if appropriation of retained earnings is (a) activated in Customizing for consolidation of investments and (b) selected for the balance sheet
  All of these balance sheet items are replaced by Retained Earnings - Clearing Item for Consolidation of Investments.
All transaction types are replaced with the transaction type Divestiture from Consolidation Group (if they exist and are not initialized).

The following exception exists for appropriation of retained earnings: Preparation for divestiture not only resets Appropriated Retained Earnings, but also posts to (a) the Clearing Item for Consolidation of Investments and (b) Transfers to Appropriated Retained Earnings with a reversed debit/credit sign.

Accounting Technique and Posting Level

Posting Levels 02 and 12

Preparation for divestiture only considers consolidation units that are consolidated with accounting technique Purchase Method. The relevant divestiture period is the divestiture period of the consolidation unit.

Posting Level 22

Preparation for divestiture only considers data records in which the consolidation group consolidates both the acquired consolidation unit and the partner unit with accounting technique Purchase Method.

The divestiture period is either the divestiture period of the acquired consolidation unit or the divestiture period of the partner unit.

When divestiture accounting of the divested consolidation unit takes place, then the divestiture period of the divested consolidation unit must lie between the partner unit's period of first consolidation and the partner unit's period of final divestiture. The converse also applies.

Posting Level 32

For more information about posting level 32, see Consolidation Group Changes for Group-Dependent Entries.

Relationship Between Preparation for Divestiture and Reporting

When reporting selects data with posting levels 00, 01, and 10, it considers only the timeframe in which the consolidation group had ownership in the consolidation unit. (The dates of first consolidation and divestiture accounting are used for this.) When reporting selects data with posting level 20, it considers only the timeframe in which the consolidation group had ownership in both the consolidation unit and the partner unit.

If the consolidation unit is divested at the beginning of the period, reporting does not select the divestiture period – neither does preparation for divestiture.

In contrast, when selecting data with posting levels 02, 12, and 22, reporting disregards the dates of first consolidation and divestiture accounting.

By doing so, both reporting and preparation for divestiture compute accurate values because all posting levels are totaled.

Example

Final divestiture at beginning of period 002, posting level 00
		Database				Reporting
	PL	00			02	00			02	00+02
	Period	000	001	002	002	000	001	002	002	Total
Balance Sheet Item	Trans.Type
Cash	--	10	10	10	-20	10	10	--	-20	0
Property, Plant & Equipment	Opening balance	100				100				100
	Acq.		10	10			10	--		10
	Div. CG				-110				-110	-110
Retained Earnings, Prior Year	Opening balance	-60				-60				-110
Retained Earnings, Current Year	Acq.		-20	-20			-20	--		-20
Clearing C/I	Div. CG				*30				90	90
Appropriated Retained Earnings		50	10	10	-60	50	10		-60	60
Retained Earnings – Transfers to Appropriated Retained Earnings.			-10	-10	60		-10		-60	60
Income Statement	--		-20	-20			-20	--		-20
Transfers to Retained Earnings, Current Year	--		20	20			20	--		20

*) The following items (in periods 000 and 001) are posted with a reversed debit/credit sign to Retained Earnings - Clearing Item for Consolidation of Investments (Clearing C/I):

Retained Earnings, Prior Year (OB); Retained Earnings, Current Year (Acq.); Appropriated Retained Earnings; Retained Earnings - Transfers to Appropriated Retained Earnings

Amounts calculated are: 60 + 20 - 50 - 10 + 10 = 30

Final divestiture at end of period 002, posting level 00
		Database				Reporting
	PL	00			02	00			02	00+02
	Period	000	001	002	002	000	001	002	002	Total
Balance Sheet Item	Trans.Type
Cash	--	10	10	10	-30	10	10	10	-30	0
Property, Plant & Equipment	OB	100				100				100
	Acq.		10	10			10	10		20
	Div. CG				-120				-120	-120
Retained Earnings, Prior Year	OB	-60				-60				-60
Retained Earnings, Current Year	Acq.		-20	-20			-20	-20		-40
Clearing Cons. of Invest.	Div. CG				*50				120	120
Appropriated Retained Earnings		50	10	10	-70	50	10	10	-70	-70
Retained Earnings – Transfers to Appropriated Retained Earnings.			-10	-10	70		-10	10	70	70
Income Statement	--		-20	-20			-20	-20		-40
Transfers to Retained Earnings, Current Year	--		20	20			20	20		40

*) The corresponding items (in periods 000 through 002) are posted with a reversed debit/credit sign to the Clearing C/I item.

60 + 20 + 20 - 50 - 10 - 10 + 10 + 10 = 50

Final divestiture, posting level 20, “Cash” item only
					Database				Reporting
				Per.	000	001	002	003	000	001	002	003
Case	FC (CU)	FC (PU)	DA (PU)	PL
1	002/BOP	Prior year	003/EOP	20	10	10	10	10	10	10	--	--
				22			-20				-20
2	002/EOP	Prior year	003/EOP	20	10	10	10	10	10	10	10	--
				22			-30				-30
3	003/BOP	Prior year	003/EOP	20	10	10	10	10	10	10	10
				22				-30				-30
4	003/EOP	Prior year	003/EOP	20	10	10	10	10	10	10	10	10
				22				-40				-40
5	≤ 002/EOP	003/BOP	≥ 003/BOP	20	10	10	10	10	--	--	--	--
				22

Abbreviations:

Retained Earnings, Current Year = Retained earnings from current fiscal year
FC = first consolidation
DA = divestiture accounting
BOP = beginning of period
EOP = end of period
CU = consolidation unit
PU = partner unit
Per. = period
PL = posting level

Explanations:

In cases 1 through 4, the dates of first consolidation and divestiture accounting for the consolidation unit and partner unit have overlapping time intervals. This makes it necessary to post preparation for divestiture entries.
In case 5, the dates of first consolidation and divestiture accounting for the consolidation unit and partner unit do not have overlapping time intervals. Thus, no entries are posted – neither in reporting nor in preparation for divestiture.
As a rule, consolidation units and partner units share the same logic. You could switch the two units and still have the same results in postings and reporting.